tv [untitled] December 13, 2011 6:22pm-6:30pm EST
that is generated by bank credit expansion is a very powerful explanation of how we call me to get into these situations where then ultimately a recession is unavoidable right and right now of course it's becoming more of a question going back to this question because as the economy continues to suffer there is the talk now of going back to a gold standard and the people like krugman or bernanke a you think that the gold standard caused the depression. totally disregarding the incredible bubble of credit of the one nine hundred twenty s. whereas other folks are pointing to gold and saying look it's the only. real system that we've had that's been consistently workable over the year so it's becoming more of a factor but let's look at europe for a second because you've got. the tim geithner and his school ever expanding debt and to promote quote unquote aggregate demand trying to push merkel on the
bundesbank around the e.c.b. to expand money supply to mimic the problems of america germany doesn't want to do that and then you've got of course david cameron in the u.k. who's defending the turf of the corruption in the city of london you know a i.g.a. lehman brothers and f. global all went through david cameron city of london this is the global headquarters of fraud so he's trying to protect his turf how do you see this europe situation going forward because it's really a clash between these two schools of thinking isn't it i mean before say more about europe i mean as you said before you know there is this debate now about a gold standard has the gold standard course the great depression and it's very clear in my view that the goals that it has not created the great depression what has been the case is even on the gold standard conditions bankers and politicians and the two of them work together here as they do today one to have ongoing credit expansion is very profitable for the banks you obviously politicians want to fall for his reasons as well you can one. much larger budget deficit you know the states
for the last thirty years that we have complete money system around the world states around the world could accumulate huge amounts of debt and funded lot of their spending not via taxation but by constantly boring money so states and banks hugely benefit from the system of fully elastic money but it is very clear from the austrian analysis that you reach some kind of end point here that you cannot push the system out ever more ever more at some stage you have excess levels of debt you have overextended and weak banks you have completely distorted as it markets and at some stage the system is craving a correction you know a deal leveraging even defaults and sort of some sort of liquidation of these accumulated imbalances so how does it play out in europe i think the only alternative you have is you stop printing money and allow the market to liquidate what the market ultimately perceives to be you know unsustainable you know the
extent that we have accumulated debt is completely out of line with underlying private savings true savings and also with the underlying real income streams. of the market to correct like we've seen in the case of greece which i argue is painful it is very painful but the alternative would be you print ever more money ever more aggressively which then destroys the entire currency system i think the problem in europe is simply that i think the german position tries no some kind of middle way in which you do not default but you don't print money either in which you try to cut back budget deficit as quickly as you can to build confidence in the market again all right well let me just talk about the austrian school itself now carl mager the founder of the austrian school all he was one who posited that economics itself is not to be viewed as a hard predictive science like physics or chemistry where the point is to be able.
to predict outcomes by having a hard set of formulas the etc but that economics is more of a science of self knowledge that our our our experience as human beings in our quest for self knowledge is the is the school of economics that he founded and that by understanding this you can understand more how economics works in society and going forward is this this is obviously. a radical school for some however it seems as though it's time has come again because the folks that are running these global economy same woefully inadequate in even knowing their own motives when you talk to jon corzine of m.f. global he does the same to understand that he stole a billion dollars he has no self-knowledge at all he's a sociopath maybe he needs to visit an austrian school to understand at least
himself your thoughts there's a thing i like your description very much i do think yes i think the austrian school starts with the individual you know human act you know the austrian school. is very clear that economics is not like natural sciences absolutely correct and i do think a lot of the problems that we face now in the world and that i think even modern mainstream economics is in fact in crisis because it's very clear as though the strengths of mainstream economics that have developed over the last year fifty seventy eighty years and that dominate academia and you know that provide theories and knowledge for the central bankers and the financial bureaucrats around the world you know one of the problems is that these theories try to mimic the natural sciences you know that they they treated it can nomics or something like natural phenomena and how do you deal with natural phenomena where you have to observe them via the. sticks used to take data points historical data points and you try to find
patterns but the difference is if you look at economics is obviously a social science we are dealing with you know human beings and we have humans all self so when we look at the economy we can understand the motives of the activists we know why people trade we know why people safe we know why people prefer to use money rather than bought exchange so we buy it by understanding purposeful human action and building economic phenomena from the starting point of the human act we can build a better understanding of the economy are out of time dealer schecter thanks so much for being on the kaiser report supposed to be a new show thanks so much max that's going to do it for this edition of the kaiser report with me max kaiser and stacy herbert i want to thank my guest deal of shuttler he's the author of paper money collapse you can also find his personal website at paper money collapse dot com you can follow us on twitter or facebook just look up kaiser report or you can send me an e-mail kaiser report at r t t v